Richard Nixon on Budget & Economy

President of the U.S., 1968-1974

1971: I am now a Keynesian in economics: gov't creates jobs

Keynesian in economics." The famous "We're all Keynesians now" came from a cover story in the Dec. 31, 1965 edition of Time magazine, which attributed the quote to Milton Friedman.
As the [post-WWII] economy grew, the debt shrank as a percentage of it. "We're all Keynesians now," Richard Nixon purportedly proclaimed in 1971.

By then even a conservative like Nixon had accepted government's ability to keep people employed, to fill in the breach when consumers and businesses did not spend enough.
Even this wasn't precisely accurate. In a commentary appearing in the Feb. 4, 1966 edition of Time, Friedman clarified that he had actually said, "In one sense we are all Keynesians now; in another, nobody any longer is a

1971: "We are all Keynesians now"; end the gold standard

On Aug. 15, 1971, Richard "We are all Keynesians now" Nixon announced the US government would default on its pledge to deliver gold to any foreign government holding US dollars at the rate of one ounce of gold for each $35.

In addition, wage and price
controls were put in place, along with a 10% import tariff. Instead of the markets collapsing, the move was immediately praised by the Chamber of Commerce, and the stock market soared.

This was the third broken promise by our government regarding gold
backing to our dollar. Lincoln did it in the Civil War, and FDR did it in 1933 when he confiscated gold from the American people and made it illegal for American citizens to own gold.

In 1971, the shift to a new monetary regime was an unprecedented
experiment in global monetary planning, a wholesale plunge into the world of paper currency. With no backing for the dollar at all, Americans became completely reliant on the Federal Reserve to manage our money and to do so without any outside discipline

1971: We are all Keynesians now: spend during recession

During the Depression, John Maynard Keynes wrote the most influential economic treatise since Adam Smith's "Wealth of Nations". Keynes' "The General Theory of Employment,
Interest and Money" rejected laissez-faire and championed government intervention and deficit spending to restore prosperity to nations in economic depression. Keynes's book did not appear until 1936. Yet, his were said to have been the ideas behind the
New Deal. Since the 1930s, the Keynesian gospel has divided academics. Indeed, the economic history of the twentieth century can be divided into
Before Keynes and After Keynes. In 1971, President Nixon would startle conservatives and liberals alike by declaring, "We are all Keynesians now."

1971: Delink gold; float dollar; 10% import tariff

A quarter century after Bretton Woods, with Great Society and Vietnam spending soaring, America had begun to run budget deficits near 5 percent of GDP. Seven decades of trade surpluses were coming to an end. A third of a century of rising trade deficits
was about to begin. U.S. dollars were pouring out to Europe, and the Europeans had begun to cash them in for U.S. gold. Fort Knox was about to be cleaned out. But Nixon and Treasury Secretary John Connally refused to let it happen.

In August of 1971,
Nixon slammed shut the gold window, cancelled the U.S. commitment to redeem dollars for gold, let the dollar float, and imposed a 10 percent across-the-board-tariff. "Nixon shock!" said the stunned Japanese.

The dam broke. After the dollar was cut
loose from gold, the price of gold shot to as high as $800 an ounce in a decade. Bretton Woods was dead. Speculators who had bet against the dollar and against the American credibility in defending its currency were hugely rewarded.

Address deficit through spending cuts, not tax increases

We should address the deficit through spending cuts, not tax increases. The deficit exists not because the American people are undertaxed but because the US government overspends. In 1988, the federal budget topped $1 trillion for the 1st time. By 1992,
it reached $1.45 trillion, increasing 45% while the economy barely grew 10%. Taxes now claim a larger proportion of the GNP than at any time since WWII. We must disabuse ourselves of the myth that much of federal spending is "uncontrollable."

Source: Seize the Moment, by Richard Nixon, p.286
, Jan 15, 1992

1971 price & wage freeze helped only for the short-term

On August 15, 1971, I did something that went against my every instinct about what is good for the American economy: I imposed a 90-day nationwide freeze on wages and prices, to be followed by a gradual return to decontrol.
History told me that while controls might be politically popular, they would be economically disastrous.

Over my protests, an opposition-controlled Congress had given me power to impose controls. With inflation worsening, there was a swelling chorus of
demands in Congress and the media that the power be used.

When controls were imposed in August 1971 the nation stirred with excitement and sighed with relief. In the first day's trading, the Dow Jones average on Wall Street rose
33 points. But it was a false euphoria. In the short term, controls provided relief; in the long term, they made the situation worse. Once in place, they were more difficult to get rid of in an orderly way than I had expected.

Government under Republicans costs less

I costed out the cost of the Democratic platform. It runs a minimum of thirteen and two-tenths billions dollars a year more than we are presently spending to a maximum of eighteen billion dollars a year more than we're presently spending.
I will concede that in all the areas to which I have referred Senator Kennedy would have the federal government spend more than I would have it spend.

Source: The First Kennedy-Nixon Presidential Debate
, Sep 26, 1960

Expanding programs while reducing debt will increase taxes

KENNEDY: I did not advocate reducing the federal debt because I don't believe that you're going to be able to reduce the federal debt very much in 1961, 1962, or 1963.
Q: [to Kennedy]: You call for expanding some of the welfare programs for schools, for teacher salaries, medical care, and so forth; but you also call for reducing the federal debt. How you would pay the bill?

I think you have heavy obligations which affect our security, which we're going to have to meet.

NIXON: I think that it should be pointed out that of course it is not possible, particularly under the proposals that
Senator Kennedy has advocated, either to cut the national debt or to reduce taxes. As a matter of fact it will be necessary to raise taxes.